A promising special effects studio foundered just months after incorporation when relations between directors, first introduced through a government-backed matchmaking service, soured and then melted down with legal fallout persisting for years.
The High Court at Auckland last week heard claims and counterclaims about aborted virtual effect studio Lumenosity, centred on bitter disputes between the company’s directors: Former Wētā Digital effects specialists Amber and Victor Naveira; and Suzanna Mak and Asa Denton, recent business migrants from the United States.
Crucially, despite months of work and more than a million dollars being spent on high-tech LCD screens, cameras and computer equipment to run an envisaged virtual production studio, a shareholders agreement between the parties had not been signed before the company’s spectacular implosion.
Lawyers on both sides were left perusing draft agreements, emails and meeting minutes to determine how $1.5 million in payments by Denton and Mak towards the venture should be treated in the windup. The Americans argued their contributions to the enterprise were in the form of loans, while the Naveiras insisted they had bought into the company with an equity investment.
The Naveiras also accused Mak and Denton of bullying, and hiring private detectives to surveil them at home after the dispute turned toxic; conversely, Mak and Denton claimed their business partners were incompetent and uncommitted to the joint venture. Both sides denied the other’s allegations.
The two parties had first met in May 2021 after the Kōkiri Māori Business Accelerator Programme, run by Callaghan Innovation and Te Wānanga o Aotearoa, introduced Mak to the Naveiras as a mentor.
The Naveiras had both worked at Wellywood’s Park Road Post and then Wētā Digital over the past decade, with Victor a motion-capture specialist and Amber a wrangler and data manager. Between them, they had worked on films as varied as Planet of the Apes, Avatar 2 and What We Do In The Shadows.
Since late 2016 the pair had also run creative studio The Granary, and at the time they met Mak were seeking to raise capital to buy equipment to provide in-camera virtual effects, an alternative technique to green screens that radically cuts down the time and expense spent in post-production.
Davey Salmon, KC, acting for the Naveiras, told the court the technology had been used to make Disney’s show The Mandalorian, but he was personally unfamiliar with that programme and struggled to explain it to Justice Peter Andrew.
“I’m not sure how his honour needs to know about or does know about this: The Mandalorian is TV Star Wars, is that right?”
Suzanna Mak and Asa Denton had emigrated to New Zealand in 2019 after careers in San Francisco. Mak is a former lawyer trained at Stanford, later becoming chief executive of computer diagnostic company PC Doctor, and Denton was a software developer who recently worked as a technical lead at Xero but at this time was on a “career break”.
The court heard the Naveiras were at the time of their introduction to Mak deep in talks with venture capital firm Hillfarrance which had prepared a term sheet and was said to be offering to buy into The Granary at a valuation of $12m.
That deal never went ahead, with the Naveiras pulling the pin in August. Mak told the court she still did not know why this decision was made.
“They were hearing things, and there was just a bad vibe around Hillfarrance,” she said.
Salmon put it to her that she had portrayed Hillfarrance as “sharks”, effectively helping to poison that well in order to later drive them into her own orbit. Mak rejected this suggestion.
By October, the Naveiras had run out of runway. Covid lockdowns had crimped activity in the film industry, reducing their ability to work, and savings had been depleted with their quest to raise capital unfulfilled. The couple were mulling moving overseas to chase traditional employment.
Mak proposed changing her role from mentor to partner, and in an email said she wanted to take “a stake in the company”, with her and her husband joining the Naveiras in the new venture. She told the court her offer was met with a positive response.
“When I shared this proposal with them they were literally laughing and crying tears of joy,” she said.
A new entity, Lumenosity, was set up, with assets of The Granary to be folded in along with Mak and Denton providing finance to purchase assets to set up the long-proposed virtual production studio.
Shares were split 51:49 with the Naveiras holding the majority stake, and all four were made directors. Amber was appointed chief executive, while Denton was made chief technology officer.
As Garry Williams, the lawyer acting for Mak and Denton, put it to the court, this marked a period of excitement for all parties: “One of the main reasons that they [Mak and Denton] entered into this arrangement was so that they could have, in particular for Asa, something exciting to do in a field where he had skills and abilities where he could be useful”.
Throughout November and December, orders were placed and payments were made by Mak and Denton for $1.5m in studio technology equipment and property leases. Lumenosity itself was only formally incorporated in early December, with the court hearing progress on a shareholders agreement had stalled at the draft stage.
Mid-January 2022 is when, as Williams put it to the court, “things start to go wrong”.
The Naveiras were to move to Auckland, where studio space had been leased for Lumenosity to build and fit out its new studio, but proposed accommodation in a guest house on Mak and Denton’s property was said to still be a construction site.
Disputes arose over copy on the nascent company’s website, where the Naveiras bridled at Mak and Denton wanting to describe themselves as “founders”. The Naveiras also started to become concerned about the fit of Denton.
Mak, pressed by Salmon on Denton’s credentials to be a chief technology officer in a special effects business where he had no prior industry experience, defended her software developer husband.
“I am seriously saying that he would be an outstanding candidate to architect and ensure that the rendering of the volume would be a scalable, replicable business product from the software capability,” she said.
The Naveiras claim they were misled when Denton claimed to have FX experience, an allegation Mak rejected: “He was talking about foreign exchange [FX] trading [rather than special effects]. That does not amount to dishonesty, but their misunderstanding”.
Matters reached a head in mid-February when Mak and Denton demanded the Naveiras accede to performance management and a trial period and Amber stepping down as CEO. The Naveiras countered with a request for their partners to retreat and become silent shareholders, or to be able to seek new shareholders to buy their partners out.
Throughout all this, there remained no signed shareholders agreement.
Mak, who claimed experience in matters of corporate governance, was subjected to withering cross-examination by Salmon who asked her: “You were saying you were a person who writes down anything important?”
“I try to,” she said.
Salmon said: “You don’t have good governance or management expertise, because you failed to document critical steps that were part of your domain.”
She said: “I won’t agree I have no expertise or experience, but I will admit I made a mistake.”
After the venture had failed, attempts by Mak and Denton to sell the virtual production assets stalled after the Naveiras claimed they were company property, and marketing them as a full lot was a breach of nondisclosure agreements by disclosing trade secrets of the studio setup.
Both sides lawyered up, and an embryonic startup that had operated for only a few months became a legal nightmare that lasted years.
The trial had been scheduled to begin on Monday last week and run for four days. But on Tuesday, after just a day and a half of testimony featuring mainly Mak on the stand, proceedings were paused. By the end of the day, a settlement agreement had been signed and proceedings discontinued.
Unusually, there was no joint statement accompanying the settlement. Both parties declined Herald invitations to comment on the saga or its conclusion.
Liquidators were appointed to Lumenosity in March.
Matt Nippert is an Auckland-based investigations reporter covering white-collar and transnational crimes and the intersection of politics and business. He has won more than a dozen awards for his journalism — including twice being named Reporter of the Year — and joined the Herald in 2014 after having spent the decade prior reporting from business newspapers and national magazines.